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>>> How China Is Reining in Its Mighty Tech Firms


Bloomberg

by Coco Liu and Zheping Huang

July 8, 2021


https://www.bloomberg.com/news/storythreads/2021-07-09/how-china-is-reining-in-its-mighty-tech-firms?srnd=premium


What You Need To Know

China’s government stunned investors and tech industry players this week, launching an investigation into data violations at Didi Global Inc. and blocking downloads of its app just days after the ride-hailing giant raised $4.4 billion in the second-largest debut by a Chinese firm in U.S. history. The State Council or cabinet followed swiftly with a warning it will crack down on overseas listings in the interest of safeguarding national security.

Now, Bloomberg News reports the State Council plans to close a big loophole that China’s largest corporations have used since 2000 to float abroad — making its strongest move yet to take control of a trend that’s enriched tech giants and bankers alike for two decades.

Why It Matters

Unfolding in rapid-fire fashion over the July 4 weekend and subsequent days, the latest moves mark an expansion and escalation in a broader campaign to curb the growing power of internet titans from Jack Ma’s Ant and Alibaba to Tencent and Meituan since late 2020.

It’s the culmination of a growing perception in Beijing in recent years that — following years of phenomenal, near-unchecked expansion — online businesses are amassing valuable data, minting billionaires and creating private business strongholds with enough resources and popular followings to perhaps someday threaten the Communist Party’s grip on power.

The government is now employing various avenues — including anti-monopoly investigations, new laws and direct communications with top executives — to rein them in. With Didi, that campaign is now pivoting to take direct aim at the source of their power: The enormous amounts of data that they hoover up daily from hundreds of millions (in some cases, upwards of a billion) users both at home and abroad.

President Xi Jinping’s government wants to find a way to harness that data to fuel more broad-based economic growth over the next few decades. The moves have chilled the global investment community — China’s largest tech firms have shed at least $800 billion of market value since February, when Beijing’s effort kicked into high gear. The current salvo, which expressly focuses on data security and the risks of exposing Chinese secrets to overseas interests, has now ratcheted up the uncertainty.

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